Pivot Point Trading
What is a Pivot Point?
A pivot point in forex trading is a reference point on a forex trading chart where a trader can either watch to enter the market, take profit or place a stop. It is a point that acts as a resistance or support. These areas can also be identified as areas of demand and supply. Floor traders used pivot points a lot because it is one of the leading indicators of any markets. And yes from charts, you really can see that pivot points are effective points you can reference in your day trading efforts. So if you want to effectively trade the markets, it will be wise to know these areas of demand and supply before you start trading every day.
Pivot Point Calculator
How do you calculate pivot points?
There are free pivot point calculators on the internet today. You need the following values from the previous day data to calculate pivot points. The high, the low and the close values of the previous day. Remember, you can calculate weekly or monthly or anytime period pivot. My broker chart package comes with automatic addition of pivot points. Great chart package. I have a pivot point calculator here.
How to manually calculate pivot point4>
Here is how you calculate pivot point
Pivot Point (PP) = High + Low + Close/3
The other points of resistance (R1,R2,R3) and support (S1,S2,S3) can be calculated as follows
R1 = (2 x PP) � Low
S1 = (2 x PP) � High
R2 = (PP � S1) + R1
S2 = PP � (R1 � S1)
R3 = (PP � S2) + R2
S3 = PP � (R2 � S2)
Check this chart with pivot points plotted.
As you can see from the chart, the price met resistance at R1 and started pulling back and traded to the pivot point. This in an intraday chart. 15 minute to be specific. So you can factor this in as you day trade the forex market.
In my complete forex trading system, I explain in details how I use the pivot point, macd and moving averages. So as you continue your forex education, be sure to read everything, before going to the trading system. You will have the correct mindset before you start using my trading system.
Pivot Point Analysis
Analyzing the pivot point is really straight forward. You've got the high, the low and the close of the previous day or previous period. Now all you need is to use the equation to calculate the pivot point and then the resistance and support levels. If you are a day trader you can use the daily high,low and close to calculate the pivot points everyday before you start your trading. If you are a swing trader, you can then use the weekly high, low and close to calculate the pivot point, resistance and support levels every week. If you are a long term trader or position trader as some may call it, then you can go ahead and use the high, low and close of the month. Since these levels are estimates, you will at least have an idea of where the market will be heading based on your pivot points. You time spent to analyze and calculate these levels will pay of as you prepare for your trading day, week or month.
Pivot Point Trading
In my Pivot Point Trading , I use MACD and Moving Averages to help me pin point my entry. I use the Pivot Points for targets and stop losses. If my trading signal which is usually based on price movement relative to moving averages occur around a pivot point, then that trade is usually a high probability positive trade. In my trading system, you will see how I combine the these three technical indicators. The moving average values and Macd values I use are completely different from what most people usually use. This is unique to me and I am sharing it with you for free. Pivot Point trading is profitable. If you prepare well and patiently wait for signals to occur, you will do just fine.
Pivot Points Conclusion
You have learn how to manually calculate pivot points, how to use the pivot point calculator and simple way to use the pivot points in your trading. You will see all this come together in my forex trading system. For now continue your studies on the indicators that I use in my system by going to Moving Averages
If you came directly to this page on this website, I will advice you to start from the the beginning of my
Forex Trading Tutorial. You will gain much more by starting from the beginning.
|Are you new to forex trading, then I strongly recommend the course Beginning Forex Trader. This course comprised of clearly laid out video and audio designed to take you from A-Z of Forex Trading.You will learn everything you need to know to start trading the Forex the right way.Highly Recommended